Question

NPV, with rankings Botany Bay, inc, a maker of casual cioting a conaidering tour projects shewn in he foowinblBecause of past Snancial icis the company has a high cost of capial at a. Calculate the NPV of oach project using a cost of capital of 142% c. Calculate the IRR of each project and use it to determine the highest cost of capital at which al of the projects would be acceptable

Answer 1

A.)
	A (in $)	B (in $)	C (in $)	D (in $)
Year 0	-50700	-101000	-79600	-179700
Year 1	20300	36400	21000	99900
Year 2	20300	51500	39700	79500
Year 3	20300	50100	60200	59800
Cost of Capital		14.20%
Using the CF Function on Final Calculator
	A	B	C	D
NPV	-3729	4002	9650	8888
Acceptable/ Not Acceptable	Not Acceptable	Acceptable	Acceptable	Acceptable
Reason	Since NPV is negative	Since NPV is positive	Since NPV is positive	Since NPV is positive
B.)
Rank Acceptable Projects by NPV
Rank	Project	NPV	(sort largest to smallest)
1	C	9650
2	D	8888
3	B	4002
C.)	Using the following inputs calculate IRR on financial calculator
	A	B	C	D
Year 0	-50700	-101000	-79600	-179700
Year 1	20300	36400	21000	99900
Year 2	20300	51500	39700	79500
Year 3	20300	50100	60200	59800
IRR	9.76%	16.43%	20.21%	17.41%
D)
The highest cost of capital at which all projects would be acceptable is
A. 9.76%